Contemporary IT-Assisted Retail Management

Contemporary IT-Assisted Retail Management

Herbert Kotzab (Copenhagen Business School, Denmark)
DOI: 10.4018/978-1-60566-026-4.ch120
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Abstract

Retailing can be defined in two ways, either as a set of functions that adds value to products/services that are sold to end users (functional understanding of retailing) or as a specific institution within a marketing channel that executes retail functions (institutional understanding). The functional view explains retailing as an exchange activity in order to connect a point of production with a point of consumption. These exchange processes refer to (see Kotzab & Bjerre, 2005): • Marketing processes, including all activities that provide a customized set of products/services as demanded by customers/consumers (which is basically known as offering a customer-oriented assortment in terms of quality and quantity) • Logistics processes, including all activities that help to transfer this specific set of products/services to the markets (such as transportation, breaking bulk and inventory management) • Assisting processes, which refer to all activities that facilitate a purchase (such as credit function, promotion or advice function). The orchestration of these functions leads to various types of retail formats such as store-based retailers (e.g., hypermarkets or category killers), non-store-based retailers (e.g., mail-order retailing or electronic commerce) and hybrid retailers (e.g., home delivery services) (Coughlan et al., 2006). Retailing plays a vital role in today’s economy, but many retailing companies face economic pressure as they operate predominantly in mature and stagnant markets (e.g. Seth & Randall, 2001). In order to face these specific challenges, retailing companies adapt strategies that allow them to gain economies of scale by offering highly customized solutions to their customers (see Table 1). These strategies are built upon the latest developments in information technology (IT) and are therefore called IT-assisted retail management strategies. The following chapter presents an overview to contemporary IT-based retail business models and frameworks that show how IT has created a new mandate for retail management. IT is defined here as the hardware and software that collects, transmits, processes and circulates pictorial, vocal, textual and numerical data/information (e.g., Hansen & Neumann, 2005; Chaffey, 2004).
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Introduction

Retailing can be defined in two ways, either as a set of functions that adds value to products/services that are sold to end users (functional understanding of retailing) or as a specific institution within a marketing channel that executes retail functions (institutional understanding). The functional view explains retailing as an exchange activity in order to connect a point of production with a point of consumption. These exchange processes refer to (see Kotzab & Bjerre, 2005):

  • Marketing processes, including all activities that provide a customized set of products/services as demanded by customers/consumers (which is basically known as offering a customer-oriented assortment in terms of quality and quantity)

  • Logistics processes, including all activities that help to transfer this specific set of products/services to the markets (such as transportation, breaking bulk and inventory management)

  • Assisting processes, which refer to all activities that facilitate a purchase (such as credit function, promotion or advice function).

The orchestration of these functions leads to various types of retail formats such as store-based retailers (e.g., hypermarkets or category killers), non-store-based retailers (e.g., mail-order retailing or electronic commerce) and hybrid retailers (e.g., home delivery services) (Coughlan et al., 2006).

Retailing plays a vital role in today’s economy, but many retailing companies face economic pressure as they operate predominantly in mature and stagnant markets (e.g. Seth & Randall, 2001). In order to face these specific challenges, retailing companies adapt strategies that allow them to gain economies of scale by offering highly customized solutions to their customers (see Table 1).

Table 1.
Cornerstones of contemporary IT-based retail management (see Kotzab & Bjerre, 2005)
    IT-based retail marketing strategies    IT-based retail logistics systems
  • Re-engineered IT-driven retail formats, allowing for a customized shopping experience
  • Development of new retail channels, (e.g., Internet-based retail formats to address new customer segments)
  • Category management, in order to offer client-oriented sets of products, resulting from a joint-planning process with manufacturers based on real-time accessed client data
• The implementation of just-in-time-oriented replenishment systems by connecting the electronic point-of-sale- (EPOS) systems with the manufacturers’ ERP-systems
• The execution of IT-driven distribution center operations with no-inventory-holding transit terminal structures
• The realization of Vendor-Managed-Inventory-Programs on a continuous replenishment basis to reduce inventory levels and to improve order cycles

These strategies are built upon the latest developments in information technology (IT) and are therefore called IT-assisted retail management strategies. The following chapter presents an overview to contemporary IT-based retail business models and frameworks that show how IT has created a new mandate for retail management. IT is defined here as the hardware and software that collects, transmits, processes and circulates pictorial, vocal, textual and numerical data/information (e.g., Hansen & Neumann, 2005; Chaffey, 2004).

The following IT is of special interest in relation to IT-assisted retail management:

Key Terms in this Chapter

Scan & Bag: Special application of a self-check-out-system.

Electronic Data Interchange (EDI): Meta-term for a multitude of different electronic message standards that allow a computerized and highly structured low error communication between computers. A “merge” between EDI and Internet technology can be recently observed by the upcoming of web-based EDI solutions, where on EDI-partner does not have to install EDI but use common web browsers to communicate via EDI.

Barcodes: Simple form of optical character recognition, where information is encoded in printed bars of relative thickness and spacing. RFID combines this technology with radio frequency.

Self Check Out Systems: Self check out systems can occur at the end but also during shopping processes whenever cash-desk operations are ‘outsourced’ to consumers. In that case, consumers self register their items with specific scanning devices.

Cross docking: Just-in-time flow through operations in a distribution center which transform incoming deliveries as fast as possible to customer specific outgoing deliveries.

RFID (Radio Frequency Identification): Form of automated radio frequency based identification of objects. RFID systems consist of an antenna, a transceiver for reading radio frequency and to transfer information, a processing device and a transponder.

Continuous replenishment systems: Automated order retrieval systems which reduce out-of-stock situations at the point of sales by linking Electronic Point of Sales Systems with supplier factories.

Electronic Shelf Labels: Price tags that provide accurate pricing due to electronic linkage between the shelves and the checkout system. The technology is based on radio-frequency, infra-red and/or WLAN linking a master check-out with the shelves.

Electronic Product Code (EPC): RFID-based product identification standard that developed from bar codes. EPC is managed by EPC Global Inc., which is a subsidiary of EAN.UCC. EPC numbers are able to accommodate all EAN.UCC keys.

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